Readers hoping to buy MERCK Kommanditgesellschaft auf Aktien (ETR:MRK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 29th of May in order to receive the dividend, which the company will pay on the 3rd of June.
MERCK Kommanditgesellschaft auf Aktien's next dividend payment will be €1.30 per share, and in the last 12 months, the company paid a total of €1.30 per share. Based on the last year's worth of payments, MERCK Kommanditgesellschaft auf Aktien stock has a trailing yield of around 1.3% on the current share price of €103.8. If you buy this business for its dividend, you should have an idea of whether MERCK Kommanditgesellschaft auf Aktien's dividend is reliable and sustainable. As a result, readers should always check whether MERCK Kommanditgesellschaft auf Aktien has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately MERCK Kommanditgesellschaft auf Aktien's payout ratio is modest, at just 36% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see MERCK Kommanditgesellschaft auf Aktien earnings per share are up 6.1% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, MERCK Kommanditgesellschaft auf Aktien has lifted its dividend by approximately 10% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy MERCK Kommanditgesellschaft auf Aktien for the upcoming dividend? Earnings per share growth has been growing somewhat, and MERCK Kommanditgesellschaft auf Aktien is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and MERCK Kommanditgesellschaft auf Aktien is halfway there. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while MERCK Kommanditgesellschaft auf Aktien has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for MERCK Kommanditgesellschaft auf Aktien that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.